Nearly 100,000 properties in Philadelphia are encumbered with debt for failure to pay the city’s real estate tax. In all, the city is owed over half a billion dollars in unpaid real estate taxes alone.

These properties represent one of the city’s biggest challenges. But, thanks in part to new city laws, they also represent one of its biggest opportunities.

Recently, Philadelphia’s City Council has been holding hearings around one part of the proposed solution to the city’s tax-debt problem: the city’s renewed effort to collect the taxes it’s owed.

At the same time, our map, “Landscape of Possibility,” shows why collection will have to be just one part of the solution to the problem of putting abandoned and debt-ridden property back into productive, tax-paying use.

The city’s struggle with collections, chronicled in a series by PlanPhilly and the Inquirer, is formidable: a 2011 report by the latter cited Philadelphia as having the “least-effective delinquent property tax collection system of the nation’s biggest cities.”

Last June, shortly following a special report for the Inquirer by Patrick Kerkstra tying much of the debt to absentee landlords and shell companies, Philadelphia’s City Council approved an ordinance requiring the city to pursue debt more aggressively, while formalizing a way for homeowners who owed back taxes to enter into payment plans. Tax delinquency has declined—but only by about $18 million over the last year.

But the focus on collection leaves out another part of the overall problem: the properties for which back taxes will never realistically be paid.

A 2013 study by the Pew Charitable Trust concluded that while properties with less than five years’ delinquency are a good target for collection enforcement, properties that have been delinquent 10 years or more are far less likely to ever be collected upon.

Our own analysis found that of the roughly 96,000 tax-delinquent properties in Philadelphia:

About 58,000, or 60 percent, have been tax-delinquent five years or less.

Another roughly 25,000, or 26 percent, have been delinquent more than 10 years.

15 percent of tax-delinquent properties currently are “underwater,” meaning they owe more in taxes than they are worth.

This interactive map shows how properties have been tax delinquent for more than ten years, as well as how many now owe more in taxes than they are worth. Properties marked in blue, of which there are many, were encumbered with 10 or more years of tax liens, according to the most recent data available. Properties that are “underwater,” in debt at a sum more than their market value, are marked in red.

If part of the city’s solution to tackling its delinquency problem is better collections, another enormous part of its strategy will be finding a way to let go of debts it will never collect.

That’s one big reason many advocates of reform supported the creation last fall of a “land bank,” an entity made up of administration and Council representatives and community members, which has the power not only to acquire tax-delinquent properties and effectively circumvent the sheriff sale process, but also to wipe properties clean of city debt—and then, ideally, resell them to be put back into productive use.

The Land Bank bill passed Council and was signed by Mayor Nutter last year. If successful, it would become a central clearing house for acquisition of tax delinquent properties and land.

Our project, “Landscape of Possibility,” is a map not just of the city’s tax-delinquency problem, but also of the incredible opportunity for the re-use of abandoned land and property that problem presents.

]]>http://axisphilly.org/article/landscape-of-possibility/feed/3Innovation, Inc.http://axisphilly.org/article/innovation-inc/
http://axisphilly.org/article/innovation-inc/#commentsWed, 26 Mar 2014 00:35:10 +0000http://axisphilly.org/?post_type=post&p=5526In the six years since he took the helm at the University City Science Center, Stephen Tang has become one of a new group of leaders who are determined to change the trajectory of Philadelphia’s economy in a significant way.

When you sit and talk with Tang, a man whose intellect and intense ambition are apparent beneath his polite, sincere, almost shy manner, it soon becomes clear that this is not an accident – and that his mission is about more than creating new jobs. He wants to build a healthier civic society.

His ultimate goal is nothing less than recreating the city’s business environment altogether, and renewing its economy with people who will eventually demand transformative change in city government. It’s a startlingly ambitious goal, especially in a city like this one, which has an antique political system, a stubborn resistance to change, and a long history of who you know being more important than what you know.

The goal also has a daunting against-the-odds quality to it. Creating new economy jobs — in fact, creating almost any kind of new jobs — has eluded the city. Our record of job creation lags far behind most big cities and the nearby suburbs — and has for decades.

But due to the efforts of Tang and others like him, this city’s possibilities for future businesses, and the jobs they could bring with them, have changed dramatically over the past six years.

To begin with, all the players are truly collaborating, and have created a sense of community across a range of organizations that had a long history of working in silos. They’ve outlined their challenges and agreed upon a strategy for solving them. And they’re making concrete progress.

Six years ago, for instance, the lack of seed money for early-stage funding for start-up businesses was a major complaint. Now, it’s no longer a problem. In the last year alone, Artisan Mobile raised $7 million; Solve Media raised $6 million, RJMetrics Inc. raised $5.25 million; Curalate raised $3.25 million; and Real Food Works won financing from the city’s new $6 million seed fund.

“The funding is getting there, we’re getting there on talent retention, and the mentorship seems to be good,” said Bob Moul, CEO of Artisan Mobile and Chairman of the Board for Philly Startup Leaders, a networking organization for the region’s entrepreneurs.

Next up is building more interaction between the universities, with their universe of grad students, and the city’s start-up community.

“I found it quite shocking that people were coming here, graduating, and then feeling that they had to go New York to do a start-up,” said Moul. “They just didn’t realize that there was a healthy start-up community right here in Philadelphia.”

By coming up with a strategy, keeping their focus, and working together, the groups fostering job creation are clearly creating a better environment for the kind of entrepreneurs who are building the new global economy.

“Picture a vacant garden with hardly any seeds planted, and terrible weather conditions. That was Philadelphia 20 years ago,” said Steve Goodman, a lawyer who founded the emerging growth practice at Morgan Lewis, and has been representing start-ups for more than 40 years. “We’ve got a completely different environment now. Sure, we’re not done yet. But on a relative basis, I would challenge any other region of the country to show the level of growth and development that this one has.”

Tang, a Chinese-American who came here six years ago as an “outsider” from Wilmington, came to the job with a blend of experience in academia, for-profit and non-profit businesses. Perhaps that’s why he saw the potential for the Science Center – the oldest and largest urban research park in the country, with a 17-acre campus and a powerhouse membership that includes major universities and businesses – as a real fulcrum for innovation, a kind of “clubhouse” for entrepreneurs.

“He took a place that was just a bunch of laboratories and some office buildings, and made it a vibrant centerpiece of our entrepreneurial ecosystem,” said Goodman. “He has created an institution that has influence, connectivity, assimilation, facilitation, all the things that you need in a leadership organization.”

He did it with a style that works in a city like this one, where change agents are met with skepticism, at best. He set about meeting others who were already working for change, listened to what they had to say, and asked how he could help. Colleagues say his collaborative and “listening” style has helped him break through some thorny turf battles.

“He didn’t come in riding on a horse, or with guns blazing. He asked a lot of questions. He was thoughtful. He was all ears,” said Goodman.

Craig Carnaroli, the University of Pennsylvania’s VP and Science Center board chair recalls a meeting convened by Tang shortly after he arrived that brought in all the disparate groups involved in the mission of job creation.

“It was large, and to be honest, I was a little bit apprehensive about how unwieldy it might become,” Carnaroli said. “But it turned out to actually be the start of a process that would build cohesion. He’s been out to see all 31 member shareholders of the Center, and we now get proposals from institutions all over the region – he’s created a culture where people work together.”

According to Moul, the collaborative atmosphere that has grown between his own organization and others, including the ScienceCenter, has been critical to their success so far.

“We never intended to try to be all things to all people, we just can’t do it. And Steve adopts this attitude as well. He keeps communicating, collaborating, knowing that no one organization is going to pull this off alone. We all need to play to our strengths, and support each other,” Moul said.

Still, that style can be deceptive. Tang is calm and soft-spoken, and definitely doesn’t come across as aggressive. But neither does he play it safe.

Zack Stalberg, President and CEO of the government watchdog group Committee of Seventy, remembers being impressed early on in Tang’s tenure, when he went public with a dispute with the Redevelopment Authority, which was seeking to reclaim some parcels of land.

“Instead of doing the normal thing for Philly, which is to go behind a curtain and meet quietly with some public official, or make a contribution to the campaign of some councilman in order to try and fix the problem, Tang was willing to have a very cordial public battle with them,” Stalberg said. “He made his case on the merits, and he did it in public. I was surprised, but he was unwilling to do it the old Philadelphia way, and in the end, he got what he wanted.”

While no one is claiming victory, all this collaboration is showing results.

Philly StartUp Leaders has emerged as a powerful resource, Old City’s Indy Hall has become an important hub for development, there are at least three new business incubators, universities that had no activity now have a business development plans, and start-up financing has surged.

Five companies now ready to graduate from the Science Center’s business incubator have opted to stay in the city, for a total of 200 high-skill jobs. And among the cranes that dot the West Philadelphia skyline some are for 3601 Market, the Science Center’s 28-story apartment building designed to house young professionals who build their business ideas here.

The Science Center’s Quorum, launched by Tang, has become a go-to “clubhouse” networking initiative, used and supported by virtually everyone in the region’s entrepreneurial community. And Mobile Monday, the quarterly networking event for people who are developing mobile technologies, now attracts more than 500 people.

All this has not gone unnoticed in the city’s power and political circles. Tang is now a regular presence on various panels, presentations and working groups, and he sits on a long list of boards.

“The Science Center is really on the map in a way that it’s never been before,” said Stalberg. “He’s built a lot of credibility in a relatively short period of time. Most of it comes from his brainpower and personality, and a little bit comes from the platform he’s got.”

Tang himself is taking that credibility seriously. Because the way he sees it, long-term success will require leaders who are willing to challenge the status quo, insist upon a new way of doing things, and then work together to make their vision come true.

“We’re different from some other major cities like San Francisco and Boston, where entrepreneurs and venture capitalist are part of the power structure of the city,” Tang said. “We’re getting there, but we don’t have that yet.”

While Philadelphia’s resurgent popularity among “Millennials” has resulted in a population growth that’s brought strong growth in Center City and many of its surrounding neighborhoods, it hasn’t brought a similar surge in job growth. Far from it, in fact. When it comes to providing the new jobs that young Millennials want, Philadelphia ranks closer to Detroit than it does to Boston, Washington DC, or even Baltimore.

According to the Center City District’s report, “Pathways to Job Growth,” one in four jobs have evaporated since 1970 – with 232,551 fewer private wage and salary jobs and 57,000 fewer government jobs. While most of those jobs were lost in the two decades prior to 1990, when job loss started leveling out, and very recent years show fractional gains, job growth is so far behind the rest of the region it defies belief – a scant four percent, compared to the range of 50 to almost 200 percent growth that’s happening in surrounding counties.

This chronic lack of jobs weakens the spending power of the city, and undermines the quality of everything from basic city services like road repair and code enforcement to the education offered in the public schools.

“Chronic job loss and rising poverty make doing nothing, or waiting for external factors, unacceptable options,” the report said. “These compelling crises must be confronted by Philadelphia’s business, civic, and political leaders, not with wishful thinking, but with well-considered, purposeful action.”

The report, not surprisingly, includes tax reform as part of that action – something Tang supports. He’s clear that Philadelphia needs to tax people and businesses more like the way the cities that it wants to emulate to – Boston and San Francisco, or even some other emerging centers of entrepreneurial activity, like Austin Texas.

But Tang isn’t waiting for City Council to save the day. Instead, he’s once again collaborating – this time with the government watchdog group Committee of Seventy, where he is a board member – to craft a plan for improving the quality of Philadelphia’s city government.

“As leaders of the economy, we need to create job opportunities – as the mayor puts it, we need opportunities that go from the Ph.D to the GED,” Tang said. “In order for that to happen, we need to be viewed as having good clean government to support business growth, we need to be safe, we need to be clean, and I think be attractive for transplants – whether they’re from other parts of the country, or other parts of the world.”

For now, this plan amounts to an initiative that would define the agenda for the next Mayor, as well as the qualities that Mayor should have.

“I don’t know that we can get that candidate by 2015,” said Tang. “Like anything else, if you keep on trying, maybe in the next cycle, or the cycle after that, these kinds of leaders emerge.”

But, in typical Tang fashion, he’s in it for the long game.

“The political machine in Philadelphia is too monolithic, too beholden to itself. We need Millennials to take a civic interest in what City Council is doing, and awaken their community to the idea that things can be done differently,” Tang said. “At a very grassroots level, we need people to be instigators, enthusiasts, and drive change. We’re not quite there yet, but the more Millennials that we can attract into the city, the more they will become impatient for change.”

Though economists say the Great Recession officially ended, believe it or not, in June 2009, we have a recovery where the wheels are spinning without showing much forward movement.

It shows in a number of different ways. Take tax collections, please.

In making its budget proposal for this year, the Nutter administration had to erase its estimate for wage tax revenue and pencil in a lower number. The administration’s economists had predicted wage-tax growth in the 3.5 percent range. Instead, it is coming in at 1.75 percent.

What that means is that about $60 million in anticipated revenue suddenly went poof!

On the state level, revenue from virtually every major tax is coming in lower than estimates. We’re talking both personal and business taxes, not to mention the sales tax (due probably to the bad winter weather).

The state, which was projecting a two percent overall growth in revenue this year, is currently looking at a growth rate of 6/10ths of a percent.

These numbers are temporal and could change as we advance to the beginning of the new fiscal year in July. But, the economists I talked to doubt it.

“For Philly’s economy, it’s been a long slog,” said Ryan Sweet of Moody’s Analytics. “It’s taking a little longer for Philly to find its rhythm.

One of the ironies is that while wage tax revenue is down, the number of jobs in the city has gone up. How can the number of people working increase but the wage taxes paid decrease?

That one has some scratching their heads, but as Sweet and fellow Moody’s economist Dan White point out it’s likely a function of the fact that the jobs being created are in low-paying industries—mostly service—and not in high-paying sectors such as finance, meds and eds. Another possibility: “You may still be employed, but you are working fewer hours.”

In the state, the rate of job creation also has slowed considerably. As Stephen Herzenberg of the Keystone Research Center pointed out, Pennsylvania was doing well coming out of the recession—in 2010, there were 88,600 private sector jobs created in the state.

Since then, the story has been different: 71,700 jobs created in 2011; 43,900 in 2012 and just 28,200 created last year. Put that on a chart, and it looks like a flight of stairs moving in the downward direction.

In 2013, Pennsylvania ranked 48 out of the 50 states in terms of job growth, compared to seventh in 2010.

This slo-mo job recovery obviously has a ripple effect. For instance, in the mayor’s budget the city is scheduled to spend $4.4 billion this year. However, even with most city departments in the zero increase mode, the amount of “new” money available for new programs and hiring, etc. totals only $18 million.

(Had revenue come in as projected, the city would have had $80 million-plus to spend on programs and initiatives.)

If the lower-than-expected revenues remain the same at the state level, it could cause all sorts of problems for Gov. Corbett who, in this re-election year, is in a spend mode.

Due to a tight budget, Mayor Nutter had to cherry pick on initiatives: $2 million to hire additional inspectors for Licenses and Inspections, mostly to beef up demolition inspections; $2.5 million for the Free Library so that all branches can stay open 6-days a week; $500,000 for the Recreation Department to hire (mostly part time) help for programs; $500,000 for Community College top help offset tuition increases. You get the idea. Most are tweaks to existing programs.

What Nutter did not do is deliver more money to the public schools. Superintendent William Hite had a $195 million “ask” from the city. As of now, most of that money will not be forthcoming. When asked about that, Nutter figuratively showed his empty pockets and said the city could not give more.

One thing the city will do is give the district the right to take most of the one percentage point on the sale tax added during the recession. It was due to expire this year, but will be extended—probably in perpetuity—to help the district.

The city also is asking the legislature to pass a Philadelphia-only $2-a-pack increase in the cigarette tax, which will bring in $83 million if enacted. But the chances of that passing are slim to none.

If it is any consolation, most economists—including Sweet and White—expect an uptick in jobs and the economy beginning the end of this year. There are already signs of quickening. Job creation has been steady, if unspectacular; residential and commercial construction have revived; companies are likely to begin hiring high-end employees as the year advances.

But, those happy days won’t be coming until months from now, not soon enough to help cash-strapped elected officials making their budgets this year.

]]>http://axisphilly.org/article/the-joyless-recovery/feed/0Gridlock on AVI appeals, 24,000 case backloghttp://axisphilly.org/article/breaking-news-gridlock-on-avi-appeals/
http://axisphilly.org/article/breaking-news-gridlock-on-avi-appeals/#commentsMon, 20 Jan 2014 11:48:30 +0000http://axisphilly.org/?post_type=post&p=5246If you think the famous traffic pileup on the George Washington Bridge was bad, check out the hearing room in the Curtis Center at 6th and Walnut where Philadelphia property owners go to appeal their new real-estate tax assessments under the Actual Value Initiative (AVI).

Room 300E is home to the seven-member Board of Revision of Taxes (BRT), whose job is to hear the appeals. The BRT began hearings earlier this month. No one is expecting them to be done anytime soon.

Right now, you might want to pencil in 2019.

Partly is it to do with the huge volume of appeals. More than 24,000 property owners filed appeals of new assessments done last year by the Office of Property Assessment. About 5,000 have filed ‘non-oral’ appeals in writing and do not require a formal hearing, but still need a ruling from the board.

Another 19,000 have requested a hearing before the board—and are entitled to one under the law. Though BRT Chair Russell Nigro says the board is meeting every weekday, at the rate cases are being disposed of—at least so far—it could take nearly five years for all the cases to be decided.

There’s a backstory here involving bad blood between the BRT and Mayor Nutter. The BRT used to handle assessments and appeals. Nutter tried to abolish the board entirely as part of a reform of the assessment system that included creation of a city department, the Office of Property Assessment. It took a charter change that voters approved.

Board members balked at that move, filed suit, and the state Supreme Court upheld the right of the BRT to exist—not to assess, but solely for the purpose of hearing appeals.

Board members used to get salaries of $70,000 a year. The legislation creating the new system turned that into a $150 per diem, but only on the days the board meets in formal session.

Nigro said the BRT asked for and received $115,000 in the budget to hire extra staff to handle the expected onrush of cases. The administration, Nigro said, diverted that money to other causes and the workers were never hired.

Nigro said the administration’s “hard line” on salaries and support staff is a factor in the slow pace in what he called the “herculean task” of handling the appeals.

“We are going to go out and make this work,” he said. “But we have to deal with factors— one is the number of appeals, but two is what the administration did.”

Finance Director Rob Dubow disputed Nigro’s version of the tale. He said the administration added $218,000 to the BRT in the initial draft of the city budget and later agreed to add another $115,000 while the bill was before Council.

“We asked them what they needed and they got it,” Dubow said. “If they think that is not enough and there is additional funding they need they should come see us because we want them to have appropriate resources to hear appeals.”

Whatever the origins of the dispute, Dubrow said slow resolution of the appeals serves no one’s interests, not the school district and the city, which splits property tax revenue 60-40, nor the taxpayers waiting for adjudication of their appeals.

Nigro said the BRT was considering ways to speed up appeals, such as breaking up the seven-member board into smaller panels to hear cases. “Let me just say our intent is not to have this take three years,” he said.

The last time the BRT had such a big caseload was in 2002, which also was the last time the agency did a citywide reassessment. The BRT had to handle 11,000 appeals, but many ended up being no-shows at their hearings and their cases were dismissed. The board began hearings in November and held hearings nearly every day until they disposed of them in April of 2003.

]]>http://axisphilly.org/article/breaking-news-gridlock-on-avi-appeals/feed/1The Big Stories of 2013http://axisphilly.org/article/the-big-stories-of-2013/
http://axisphilly.org/article/the-big-stories-of-2013/#commentsMon, 30 Dec 2013 14:18:39 +0000http://axisphilly.org/?post_type=post&p=5148For Philadelphia, 2013 was filled with crushing lows and euphoric highs, but the biggest stories shaped us, made us better, and united us in ways we could never have imagined.

School Closings – Facing a $304 million structural budget deficit, the School District of Philadelphia closed 24 public schools in 2013. In a city with at least 40,000 vacant parcels, the closings placed large abandoned buildings in communities that could ill-afford more vacant structures.

But the buildings are merely what we see. We can’t know how these closures will affect our children’s futures. We do, however, know this. In the schools that closed, over 90 percent of the students were economically disadvantaged. That means our most vulnerable students suffered the greatest losses.

Adults, meanwhile, spent much of the time casting blame. I saw teachers falsely accused of greed, I saw a governor disregard students to seek union concessions, and I watched self-proclaimed parent leaders pretend they were the only ones qualified to speak. The only true heroes to emerge from the ashes were the students, because they rose to fight for their own futures.

On May 17, approximately 1,000 students marched to school district headquarters in an effort to prevent the closures. Seventeen-year-old Benny Ramos, from the now-shuttered Charles Carroll High School, said they carried this message for the powers that be: “Yo, you can’t hide. We’ll be right here.”

Fire fighters at scene of 22nd and Market building collapse

The Building Collapse – The June 5 building collapse at 22nd and Market Street killed six people and injured 13 when an avalanche of brick and steel fell on the Salvation Army Thrift Shop. Tragically, the collapse took another life one week later when Ronald Wagenhoffer, a Department of Licenses and Inspections (L&I) employee who was the lead inspector on the demolition site, killed himself.

In this ensuing days, NBC10 and the Mayor’s Office wrangled over a video in which Wagenhoffer said the word “fault.” At issue was whether Wagenhoffer said the collapse was his fault, as the news station contend, or was not his fault, as the City argued.

Putting aside the issue of liability, I don’t know that it matters what Wagenhoffer said. What matters is that contractor Griffin Campbell and excavator operator Sean Benschop were charged with involuntary manslaughter and third degree murder in connection with the collapse.

But theirs wasn’t the only crime. It was a crime that our system allowed a cut-rate contractor to put lives at risk by cutting corners. It was a crime that numerous calls to 311 did not result in shutting down the site. It was a crime that people died in an accident that should never have occurred.

As a city, we must make the necessary changes before the next tragedy takes place. At least that way, those deaths won’t be in vain.

Eagles Coach Chip Kelly

The Philadelphia Eagles – They say that sports are a distraction, and perhaps they’re right. But sometimes a team comes along that captures the imagination while also illustrating our capacity for resilience. The Eagles are such a team, because their players are characters we can both loathe and admire.

Backup quarterback Michael Vick has been called a villain for his past involvement in dogfighting. And yet he’s been called a leader after vouching for teammate Riley Cooper, whose racist tirade threated to divide the locker room.

Starting quarterback Nick Foles has carried himself with great poise while leading the team to the playoffs, and league rushing leader LeSean McCoy has at times carried the team on his back.

Thanks to a year end win against Dallas, an Eagles team that went from worst to first under the tutelage of head coach Chip Kelly will host the New Orleans Saints in Philadelphia. And for a moment, we’ll forget the pain of 2013 to cheer on the flawed heroes that represent us.

The Actual Value Initiative – Early in 2013, the Actual Value Initiative (AVI), which was supposed to repair the city’s flawed property tax system, was the big story.

The problem with reassessing over 550,000 parcels is that there are bound to be mistakes, miscalculations, and inequities. Under AVI, those inequities seem to favor the commercial sector.

In a report entitled, AVI: The Shift in the Tax Burden, Pew found that residential properties would represent 59.9 percent of the city’s total assessed taxable value in 2014, an increase of six percentage points—or about $72 million—from the previous year. The commercial sector would see its property tax burden drop by four percentage points, to 17.3 percent, yielding an overall tax reduction of about $55 million for commercial properties.

The Nutter administration says that 70 percent of homeowners will see the same, lower, or slightly increased property taxes under the new system, and that’s good. But the bigger issue, especially among homeowners in working class and impoverished areas, is trust.

When you’ve watched the public school system endure mounting deficits even as your taxes are collected to fund the schools, it’s difficult to trust the system. When you’ve seen developers and new residents in gentrifying communities get 10-year property tax abatements while you continue to pay the normal rate, it’s difficult to trust the system. If you see that the owner of a commercial skyscraper like One Liberty Place will enjoy a $2.5 million property tax reduction under AVI, even as your own taxes increase, it’s hard to trust the system.

In short, history has taught us not to trust, and we’ve learned that lesson well.

The cost of sitting on many of the city’s empty lots is about to get cheaper.

The Land Bank – The passage of Land Bank legislation will streamline the acquisition and development of vacant property in neighborhoods that have been devastated by depopulation, disinvestment, and poverty.

This will be good for private developers, for Community Development Corporations, and for buyers looking to become urban pioneers in neighborhoods that have been written off for decades. But the creation of the Land Bank has the potential to change the complexion of entire neighborhoods. That hasn’t always been a good thing in the past.

From the urban renewal of the fifties up through the present, development in Philadelphia tends to follow a specific pattern. Poverty-stricken areas receive little or no outside investment. Those areas are depopulated when the inhabitants get the means to move out. Government or private developers move in. Property values increase, longtime residents are forced out, and gentrification takes place. That’s what happened with Society Hill during urban renewal. It happened with University City under the auspices of the University of Pennsylvania and the Redevelopment Authority. It happened in the Spanish Barrio in Spring Garden, and it is currently happening in areas such as Northern Liberties.

My concern with the forthcoming Land Bank is that the displacement shell game has the potential to reemerge. If that happens, quick, large-scale development could push out the very residents who provided a modicum of stability to blighted areas. And that would be a shame.

Philadelphia runners

The Boston Marathon Bombing – The April 15 bombing at the Boston Marathon killed three and injured 260, including 16 people who lost limbs. It delivered the kind of message words never could: We are at war, and the violence of faraway battlefields in Afghanistan can come to our shores when we least expect it.

We saw that on the blood-spattered streets at the Boston Marathon’s finish line, where the anguished cries of victims filled the air and severed limbs littered the sidewalks.

But the most important thing about the Boston Marathon was our response, which was especially poignant during the Blue Cross Broad Street Run that took place in Philadelphia two weeks later.

I watched as some 40,000 runners jogged beneath the train trestle at Fishers Lane, a sliver of a street where a grassy hill rises up near the northwest entrance to the Logan subway station. Some ran in silence wearing Boston Red Sox jerseys, while others carried American flags that rippled in the wind.

There was Kathy Brooks, who stood on the sidewalk wearing an encouraging smile and holding a large sign that simply read, “Go Fels! We heart Boston.”

I asked Brooks why she was holding the sign.

“Because of what happened at the Marathon,” she said. “We’re supporting. I’m supporting.”

Runners of all hues and backgrounds united in a single purpose that day, and for one morning on the streets of Philadelphia, they showed all of us what is possible in America.

I hope that spirit will follow us into 2014.

Photos: The Associated Press

]]>http://axisphilly.org/article/the-big-stories-of-2013/feed/0Center City’s retail revivalhttp://axisphilly.org/article/center-citys-retail-revival/
http://axisphilly.org/article/center-citys-retail-revival/#commentsMon, 23 Dec 2013 22:45:14 +0000http://axisphilly.org/?post_type=post&p=5132During this holiday season, Philadelphians are once again hitting the streets in full force, finishing up their gift lists and making last -minute purchases.

If they go to Center City, however, their experience is likely to be very different than it has been in the past because shopping there is not what it used to be.

For starters, there are a lot more people out – reflecting the fact that Center City now ranks third in the nation in the number of people who live in the downtown area, second only to New York and Chicago. Just as important, there are more, and better, stores.

Big shopping is no longer limited to Walnut Street between Rittenhouse Square and Broad Street. High-end national chains like Theory, Madewell and Athleta are opening up along both Walnut and Chestnut on the west side of Broad Street; independent stores pushed off Walnut by higher rents are moving to adjacent streets, and a critical mass of interesting stores can also be found East of Broad Street, a neighborhood now known as “Midtown Village.”

People who work closely with retailers and investors say this growth is likely to continue, as Philly’s shopping revival is part of a clear national trend and the city still offers plenty of space to fill. The numbers suggest they’re right. Retail rents have gone up 33.8 percent in the past year, the steepest rise for retail rent in downtown shopping districts among cities anywhere in the country. Just as important, the average annual income for all these people now living in Center City has crested $100,000 per household – a tipping point for national retailers.

“In today’s economy, an average income of $100,000 is a pretty significant number,” said Jesse Tron, spokesman for the Independent Council of Shopping Center, a national trade group for big retailers.

John Conner, president of Brickstone Realty Corp, the company now building 70,000-square feet of new retail space on the 1100 block of Chestnut Street, said the tipping point really happened about 18 months ago, when new census data showing Center City’s new population density and income levels started coming in.

“The numbers were pretty shocking,” said Connor. “It suddenly became clear to everyone that Philadelphia is an underserved market, and there are whole classes of retailers who want to be here, and aren’t.”

And with the $120 million sale of the Granary Building in Logan Square, institutional investors made it clear they were paying attention. “The institutional financing market has finally found Philadelphia, after all these many years, and we are now seeing a different type of investor,” Connor said.

The Continental

“For a long time, many investors thought of Philadelphia as an Acela stop between New York and DC,” said John-David W. Franklin, senior vice president at Madison Marquette, a national real estate investment firm that specializes in urban development. “And then all of a sudden everybody realized how affordable it is, and also what a great place it is.”

Obviously, these changes haven’t happened at all once. Expansion has happened block by block, often spurred by the addition of a store or restaurant.

The corner of 18th and Chestnut is a case in point. “It was a dead intersection, and then Stephen Starr came in with Continental,” Franklin said. “And suddenly everyone realized it was a wonderful block, and look what followed – Allen Edmunds moved in, now you have the Camper store, then just a block away you’ll have Nordstrom Rack.”

“I think Camper is particularly telling,” echoed Stefan Sklaroff, co-owner of Cella Luzuria, a new furniture store on the east side of Chestnut Street. The high end Spanish retailer is particularly focused on design, he said. Its spends a lot of money on showrooms and appeals to a sophisticated “hip” sensibility.

According to Franklin, the Center City District did a game-changing thing when it opened Sister Cities Park, which features the Milk-n’Honey eatery.

“Putting that café there really showed that you can monetize the parks – that you can take public spaces and make them more vital, things that contribute to the “buzz’ of the city,” he said.

Retail jumps Broad Street

Sklaroff is perhaps the most notable new example of the fact that this energy has also crossed Broad Street. The eastern side of Center City has historically more bedraggled than its western counterpart, and it wasn’t so long ago that walking 13th Street between Locust and Chestnut was a depressing, and sometimes frightening, experience.

Now, with the help of developer Tony Goldman, 13th Street is ground zero for some of the most interesting retail in the city, run by a group of independent store and restaurant owners who call themselves the “Midtown Village” business collective. And that vitality is now turning the corner onto Chestnut. In January, Skarloff opened his high end Cella Luxuria, a 10,000-square-foot furniture store with storefronts on the 1100 blocks of both Chestnut and Sansom Streets. The store, with its focus on sophisticated design and sustainably sourced materials, would be at home in the trendiest districts of either New York or San Francisco.

Sklaroff, like Brickstone’s Connor, said he chose Chestnut Street because he sees huge potential. The buildings, many of which were originally designed for shopping, have big footprints, and their facades, now often covered in vinyl or cracking stucco, are elegant.

“To me, Chestnut Street should be so much better, and one of the great streets of Center City,” he said. “With Milkboy there at the corner of 11th and Chestnut, Bru, West Elm, all right across the street from Macy’s, there’s no reason this can’t be an amazing spot to be.”

Milkboy is a bar and grill; Bru a gastropub and West Elm a furniture store.

“You don’t get floor plates like this anywhere else in the city,” said Brickstone’s Connor, whose project on the 1100 block of Chestnut Street will include 70,000-sqaure feet of retail space and 140-feet of storefront. “We’re talking 24,000-square feet of retail space per floor. These are the kind of high quality large format dimensions that appeal to big retailers.”

And while the pace of revival may seem slow, it’s definitely happening, now that the effects of the Great Recession are receding.

There is word – though it is just rumor now – that Trader Joe’s will anchor the Brickstone Development project on Chestnut Street, which will renovate the old Oppenheimer Collins Department Store. High-end apartments have replaced the methadone clinic that once occupied the corner of 12th and Chestnut. And all across the neighborhood, a steady conversion of dusty old buildings into upscale loft apartments is bringing more and more new residents.

“We have people in here all the time who tell us they just moved in to the neighborhood, into this loft or that, and they need something to hang over their bed, or on their dining room wall,” said Jim MacManiman, co-owner of Absolute Abstract Art and founder of the Midtown Village Business Alliance.

1200-Block of Chestnut St.

“I really credit Goldman for that – he was smart, and make a point of getting creative people into the spaces above the stores. Upstairs in these buildings, there are dozens of web developers, architects and designers,” he said. “And I feel like it’s reached a tipping point for retail. It used to be that you could always pick from half- dozen empty storefronts. Not anymore. It’s finally at that point where you have to wait for something to come open.”

Michelle Shannon of the Center City District has spent the last four years leading an effort to market Philadelphia’s retail potential to big investors and retailers with a team that includes the city of Philadelphia’s Commerce Department, Greater Philadelphia Tourism Marketing Corporation, the Pennsylvania Convention and Visitor’s Bureau, and the Philadelphia Industrial Development Corporation.

“I feel like years of consistent, and coordinated teamwork are really paying off, and our retail footprint is really expanding,” she said.

Market Street and The Gallery

When it comes to the east side of Broad Street, however, the big wild card has always been what might happen at Market Street’s Gallery, the three-block behemoth 1970’s-era shopping mall between 8th and 11th Streets that’s currently home to K-mart and Burlington Coat Factory. Despite sitting above a regional rail hub, right next to the Convention Center and Reading Terminal Market with City Hall, Independence Mall, Society Hill and Old City within close walking distance, the mall is hardly a picture of excitement.

Owner and developer PREIT (Pennsylvania Real Estate Investment Trust), which recently finished acquiring all the parcels of land that the Gallery sits on, is promising big news for the mall sometime early next year. CEO Joseph Coradino has promised a major renovation that will open the mammoth stretch of concrete with windows to the street, and “transformative” new anchor stores.

New development is also promised across the street on the Girard Estate’s property, which spans the entire city block between 11th and 12th and Market and Chestnut Streets. The block was recently purchased from the City Board of Trusts opening that to new projects. Finally, there is still the possibility that big empty lot at 8th and Market streets will be home to the city’s next Casino.

Any one of those three developments would be game changer for Market Street, and for Center City as well.

Of course, promises are easy. And none of these projects have broken ground.

But for those who are immersed in the daily work of putting these deals together, they see a trajectory that’s clearly on the rise.

“Look, you’re still going to have plenty of people for whom shopping at King of Prussia is always going to be more convenient,” said ICSC’s Tron. “But there are a number of powerful demographic forces that are driving this revival of interest in downtown urban shopping. And they’re not going away.”

]]>http://axisphilly.org/article/center-citys-retail-revival/feed/4Outbursts of Generosityhttp://axisphilly.org/article/strange-outbursts-of-generosity/
http://axisphilly.org/article/strange-outbursts-of-generosity/#commentsSun, 03 Nov 2013 10:15:51 +0000http://axisphilly.org/?post_type=post&p=4764Are the folks at Cathedral Village, the retirement community in Andorra, civic-minded citizens or a bunch of chumps? You decide.

Each year, the village voluntarily pays the city $125,000 in lieu of taxes.

I say in lieuof because as a non-profit Cathedral Village is exempt from paying any taxes, a list that includes property taxes. Yet, they do make this sizeable voluntary payment. It is inexplicable.

Despite playing phone tag, Cathedral CEO Dennis Koza and I were unable to talk last week about his organization’s shocking action.

I need his email so I can send him a copy of a recent report by the area’s large non-profits that argues that what Cathedral is doing — paying payments in lieu of taxes (PILOTS) — is a very bad idea. Nonprofits, the 56-page report argues, already provide so much to the city — in the way of services, employment, volunteers, etc. — that they should not be required to make any additional payments.

Some plead poverty. Others, such as the University of Pennsylvania, find it hard to do that with a straight face (Penn had a $632 million ‘net profit’ last year.) Instead, Penn prefers to talk about the many wonderful things it does: as employer to thousands, as educator of a large number (of mostly out-of-state) students, as a huge hospital conglomerate tending to the sick, as a do-gooder that sends forth legions of faculty and students to help the community via mass outbreaks of noblesse oblige.

In other cities, large universities and hospitals do make payments to their local governments. But, this creates nothing but “controversy, confrontation and litigation,” the report tells us, conjuring up the image of ugly storm clouds rising.

Better to follow what the report calls the Philadelphia Model, which emphasizes cooperation and good feeling between the city and the institutions. A vital part of the Philadelphia Model is that these institutions pay no taxes, nor do they do PILOTS.

You could call them proud tax freeloaders, but that would be wrong, and that’s for sure.

Obviously, Cathedral Village does not subscribe to the Philadelphia Model. It follows — what to call it? — perhaps the Andorra Model.

It turns out Cathedral is not the only offender. Seven other local institutions also pay PILOTS to the city. The totals they give are not significant. All the aid added up to only $240,222.40 this year.

Many of them started giving in the late 1990’s when Mayor Ed Rendell went on a campaign to get local institutions to kick in what he considered their fair share by helping the city through PILOTS. The program yielded about $10 million a year.

But, the Rendell method shows the flaw of the PILOT idea. While you can lean on institutions to kick in some cash, you cannot force them — they are exempt under law. Once the pressure is off, the money tends to disappear.

Still, there are some institutions that continue to give. The list includes the Albert Einstein Medical Center (but not Penn, Jefferson, Hahneman or Children’s Hospital of Philadelpia); Peirce College (but notTemple, Penn, LaSalle or St. Joe’s) and such small groups as the American College of Physicians, the Philadelphia County Dental Society and the Commission on Certification of Foreign Nurses.

I tried to track down these miscreants to find out why they weren’t with the Philadelphia Model. I had some luck.

At the American College of Physicians, for instance, spokeswoman Megan Hanks sent me a statement that said: “Even as a non-profit, ACP feels it is important to contribute to city services that ACP may benefit from directly or indirectly, such as fire and police.”

If I were Penn President Amy Gutmann I would pencil in a meeting with whoever heads this ACP bunch and tell them to get on message when it comes to PILOTS.

Of course, she couldn’t just come out and say “Stop it!” That would be crude. She could use code. Maybe a wink and a nod and an “Ixnay on Ilotspay” will do it.

Another person who should attend that meeting is the president of Peirce College. Peirce gives a PILOT, which creates a major disturbance in the field because, like Penn, Peirce is an institution of higher learning, albeit a much smaller one. It has revenue of $29 million a year, while Penn has revenue of $5.4 billion a year.

Once I reached Amanda Frey, spokeswoman for the college, I discovered the situation was even worse. Peirce not only gives a PILOT, it has a scholarship program for the children of Philadelphia police, fire and corrections department employees.

As Frey explained: “We do this as a way of giving back to the City via payments, donations and scholarship to Philadelphia students…”

The mystery institution on my list was Salus University. I had never heard of Salus. When I looked it up, I was in for a second surprise: it is located in Cheltenham Township. It is not even in Philadelphia.

Why would a foreign institution give?

As it turns out, Salus was formerly known as the Philadelphia College of Optometry. It changed its name and moved to Elkins Park years ago. It offers degree program to health professionals, most of them involved vision or auditory care.

It also turns out that Salus runs something called the Eye Institute, with a clinic in Oak Lane and smaller ones in Chestnut Hill and East Falls, where it offers eye care to individuals. These clinics also act as training centers for Salus students.

It gives because it has these branches in the city, according to spokeswoman Peggy Shelly. “The rationale is that we should give back when asked,” she said.

The Philadelphia College of Osteopathic Medicine gives, too. When I asked Carol Weisl, spokeswoman at the medical school on City Avenue to explain why, she replied: “We do it because it is the right thing to do.”

Now, there’s a dangerous notion.

]]>http://axisphilly.org/article/strange-outbursts-of-generosity/feed/4A taxing situationhttp://axisphilly.org/article/a-taxing-situation/
http://axisphilly.org/article/a-taxing-situation/#commentsWed, 30 Oct 2013 11:38:42 +0000http://axisphilly.org/?post_type=post&p=4727While people in Philadelphia are whispering about large nonprofits providing money to help the city and school district they are shouting about the issue in Pittsburgh.

Maybe mud wrestling is a better description.

Since March, Mayor Luke Ravenstahl has been involved in a no-holds barred fight with the gigantic University of Pittsburgh Medical Center over a touchy issue with wide implications: Is UPMC, as it is universally called, a non-profit or a for-profit institution or – to put it another way: Is it a charity or a business?

Ravenstahl says it is for-profit and filed suit in Allegheny County to collect payroll and property taxes for his city from UPMC, a $10-billion a year colossus with 20 hospitals and 400 outpatient clinics, not only in Western Pennsylvania but in a number of foreign countries as well.

UPMC says it is a non-profit and has counter-sued in federal court, saying the city is trying to violate its constitutional right, darn it, to operate as a non-profit entity.

The Ravenstahl suit is advancing ever so slowly through the courts. The latest gambit: UPMC, which boasts of having 50,000 employees in its PR releases and in its tax filings, argued last week that it actually has no employees.

They all work the medical center’s 37 subsidiaries, the UPMC lawyer told the judge, so Ravenstahl should sue them one-by one, not the parent organization.

And so it goes.

The Pittsburgh case is being watched by local governments – and legal professionals involved in tax and health care issues – because it could have statewide and even national implications.

If the courts eventually rule the UPMC is, in reality, a for-profit business and subject to taxation, many (make that many, many, many) other local governments will go knocking on the door of their large hospitals and other non-profits seeking to tax them.

Gary Young, an expert on health policy at Northeastern University in Boston, said if Pittsburgh wins it case in court it could have a significant impact

“The case is attracting a lot of national attention because it is UPMC, which is very influential and very powerful and has a lot of resources,” Young said. “Removal of its property tax exemption is potentially a big deal and would send a chill down the spines of so many other hospitals around the country.”

For one thing, it could prompt local communities to demand that their non-profits pay real estate taxes.

“A lot of municipalities are hurting,” said Young, who is director of Northeastern’s Center for Health Policy and Health Care Research,. “They have gone through a recession and tax revenues are down. A lot of municipalities look around and say: ‘We are barely getting by here. We have a tax-exempt hospital that owns a lot of land and we’re just getting by.”

In his suit, Ravenstahl argued that UPMC is not a “purely public charity” under recent court decisions, a reference to a 2012 state Supreme Court ruling involving a Jewish overnight camp in Pike County. I wrote about that important case recently.

To oversimplify, the Supremes narrowed the definition of what a charity is, making it easier for local governments to approach some non-profits and ask them to pony up property taxes.

Both sides in the Pittsburgh case have filed reams of briefs and supporting documents. I can summarize the city’s case thusly:

UPMC walks like a duck, talks like a duck, has been seen consorting with ducks. Therefore, it is a duck.

UPMC acts like a business (it’s CEO makes $6 million and has a private jet at his disposal); its revenue vastly exceeds its expenses (by close to $300 million in the most recent IRS filing); and it provides little in the way of real charity – it donates less than two percent of its revenues to needy patients, the city avers in its suit.

On top of that – and I mean literally on top – UPMC rents the priciest office space in Pittsburgh, at the pinnacle of the U.S. Steel building.

Pittsburgh stands to gain $11 million for the city budget and $14 million for its schools if UPMC is declared a for-profit by the courts.

The most important part of the Pittsburgh suit is not its juicy details about the imperial style of its CEO Jeffrey Romoff (who has a private chef in addition to that jet plane), it’s that two percent figure on charity.

There is no law against non-profits doing well by doing good, as the old saying goes. But, there is an expectation that if they are going to be exempt from taxes because they are a charity, they should be….well, charitable.

Young was the principal author of a recent study in the New England Journal of Medicine that examined the tax returns (even non-profits must file with the IRS) of 1,800 hospitals across the nation. It found that, on average, hospitals devote 7.5 percent of their expenses to their charitable mission and to benefit the local community.

Young notes that while 7.5 percent was the average, there was a great variation among hospitals.

At two percent, UPMC is an under-achiever when it comes to good deeds. In fact, one reason Ravenstahl – and City Council – are ticked at UPMC is because it shut down some underachieving clinics in poor areas of the city.

With most charities, it is plain as the nose on your face that they are doing good deeds that benefit the public. Those nuns in the soup kitchen at the St. Francis Inn in Kensington? That’s a charity. Sister Mary Scullion helping the homeless? Charity. A hospital that charges amply for its services, has 20 executives making $1million or more a year, a $300 million “excess” of revenues over expenses, an office atop the U.S. Steel building and a private jet?

Hmmm. Looks more like a business to me.

God bless America, I have no objection to businesses doing business, but not under the guise of being – nor with the tax breaks enjoyed by – charities.

Opponents of the suit hope it will die after Ravenstahl leaves office in three months. That’s unlikely. Councilman Bill Peduto, who is the Democratic party’s nominee – and therefore the likely winner, has said he will not only continue the suit against UPMC, but perhaps expand it to other large non-profits in Pittsburgh.

That doesn’t necessarily mean the city won’t decide to withdraw the suit in exchange for UPMC offering PILOTS – payments in lieu of taxes.

As City Council President Darlene Harris told the Pittsburgh Tribune-Review she would like the city to get at least a portion of the $24 million it would get if UPMC were declared a for-profit business.

“I’d just like to get the money they spend on TV commercials,” Harris said.

In the meantime, local non-profits take note. The Pittsburgh case could have wide repercussions if decided in the city’s favor.

Photo: The Associated Press

]]>http://axisphilly.org/article/a-taxing-situation/feed/2Can’t even spare a dimehttp://axisphilly.org/article/cant-even-spare-a-dime/
http://axisphilly.org/article/cant-even-spare-a-dime/#commentsSun, 20 Oct 2013 10:20:30 +0000http://axisphilly.org/?post_type=post&p=4678With all this talk about the city’s big non-profits kicking in money to help the city and the school district, I knew the empire would strike back — and strike back it did, in Technicolor.

Witness the striking full-color, 56-page report issued by the universities that sings the praises of the wonderful work they do, the great contributions they make and the vital role they play in Philadelphia’s economy, accompanied by a mother lode of data compiled by Econsult Solutions that pounds the point home.

To summarize, our universities and hospitals contribute a lot — a whole lot — to the city, except in one area: taxes. Being non-profits they are tax exempt. They provide zero, nada, zilch in taxes to the city and school district treasuries.

Is this a bad thing? It is not, according to the authors of the report. They call this the “Philadelphia Model,” which is described as a “synergistic partnership between the Higher Eds and City government for the benefit of the city and its residents.”

How is this model different than other cities with major higher ed institutions?

Under the Philadelphia Model, the institutions pay no local taxes. Other cities get money from the institutions in the form of PILOTS — it stands for payment in lieu of taxes — which often yield millions for local governments.

This is a bad model, the report states, a very bad model that creates “controversy, confrontation and litigation” between the institutions and local government. This approach is transactional, the report adds, and leads to bad mojo, whereby the institutions become angry and upset and sometimes withdrawal some services they once offered.

In my mind, the report has the distinct undertone of a threat: You try to get money from us, pal, and you’ll get nothing but grief.

At this point, let’s step back and stipulate the following:

Our institutions of higher learning and their affiliated hospitals do great public service to the city. We are enriched in many ways by their presence, not the least of which their role as major employers. By providing jobs, they provide tax income for the city in the form of wage taxes — though, in this report, the institutions seem too eager to claim these payments as their own. They are not. These taxes are paid by their employees.

The institutions also act as resources — for ideas, for manpower, for volunteers — for a panoply of social and educational services. This help is priceless, though that didn’t stop Econsult from putting a price tag on it — $440.6 million a year worth of community service.

As an aside, it seems tacky to me to cost out volunteerism. It makes it sound too…well, transactional, to use the pejorative the report applies to cities that collect PILOTS.

So, let us give these institutions all the praise they deserve and bring up three additional points.

Point One. Every statement made in this booklet and a variation of every number used could be applied to dozens of cities blessed with major eds and meds institutions. Yet, in many of those cities, the institutions contribute directly to the local government treasury with PILOTS.

Point Two. Seen through the prism of law and tradition, these institutions of non-profits and they are granted that status because of the services they render. Seen through the lens of reality, though, these institutions are big businesses, whose operations often generate substantial profits, though no one calls it by that name. It is called “Revenue less Expenses,” on Line 19 of the Form 990 each institution must file with the IRS.

To use two notable examples, in the last 10 years, revenue has exceeded expenses at the University of Pennsylvania to the tune of $2.9 billion. At Children’s Hospital of Philadelphia (CHOP), the figure is $700 million.

What do they do with these, um, surpluses? Do they offer rebates on students’ tuition to share in the bounty? Do they lower the medical bills of their patients by an amount commensurate with their surplus/profit? They do not. The money is used to feed the endowments of the institutions, whose role in part is to act as super-sized Rainy Day funds to see them through downturns in their business.

In 2012, the 15 largest higher ed institutions and hospitals in the city had combined revenue of $12.1 billion, combined expenses of $11.1 billion, for a total profit/surplus of $1 billion.

My curbstone analysis of that figure tells me that had these non-profits been for-profit businesses, they would have paid about $225 million last year in city taxes, of which about $70 million would have gone to the School District. This is not chump change.

The PILOT payments similar institutions give their local governments represent a small fraction of the money they would pay if they were for-profit businesses. The most I see on the lists is $17 million contributed by Boston institutions to city government there.

Point Three. These are tough times. The school district nearly went under because of massive cuts made by state and federal government. We are scrounging around the money just to buy stationery supplies. Mayor Nutter has raised taxes three times in the last three years to help the schools. The 1-point add-on the sales tax, which was supposed to expire next year, is going to stay tacked on to help the schools. Every dollar counts. No one is asking these hospitals and universities to eliminate the deficit of the district or to give hundreds of millions. Like the old Depression Era song, we simply ask, “Buddy, can you spare a dime?”

Our local non-profits have just answered with a loud, emphatic, 56-page, Technicolor “No.”

]]>http://axisphilly.org/article/cant-even-spare-a-dime/feed/3Court rules that some non-profits must pay taxeshttp://axisphilly.org/article/the-courts-say-some-non-profits-must-pay-taxes/
http://axisphilly.org/article/the-courts-say-some-non-profits-must-pay-taxes/#commentsSat, 12 Oct 2013 11:23:50 +0000http://axisphilly.org/?post_type=post&p=4643If Philadelphia’s big non-profits –Penn, Drexel, CHOP, and Jefferson Hospital et al. – seem a little jittery these days when people talk about them contributing to the local tax base, they have reason to be.

A recent state Supreme Court ruling has made it easier for local governments to tax hospitals, colleges, senior citizen apartments and other non-profits that currently don’t pay a dime in state and local taxes.

It’s universally known as the Pike County case because the appellant, who usually gets top billing in a court case, is a tongue twister: Mesivtah Eitz Chaim of Bobov, Inc., which runs Camp Moshava.

Camp M, as officials in PikeCounty call it, is a 61-acre summer camp established by the Bobov Orthodox Jewish community in Brooklyn, N.Y. It applied for tax-exempt status and was denied by Pike County officials, who argued that the camp was not a “purely public charity” as defined by previous court decisions.

In a 4-3 ruling, the high court agreed with the county and today Camp M pays $54,000 in property taxes to the county and local school district.

With its 2012 ruling, the Supreme Court opened a new round in an old fight over who gets to determine what is an exempt charity and what is not.

The legislature took the upper hand in the matter by passing a 1997 law that gave it the power. The state then adopted rules and regs that generally are considered less stringent that the court’s criteria– for instance, any entity run by a religious organization is considered de facto a non profit. Under the state standard, Camp M would be a non-profit.

Act 55 also said that once the state Revenue Department made the determination of profit or non-profit when it came to state taxes – local governments had to follow that ruling.

With the Pike County case, the Supremes swept all of that away. It reserved to the courts the right to determine what a charity was and what was not, saying the judicial branch had sole authority to determine the meaning of the clause in the state Constitution on charities.

In previous rulings, the court set up five criteria for determining an “institution of purely public charity.” To use the language in the Pike Count decision, in order to an entity to be considered a charity it must:

Advance a charitable purpose;

Donate or render gratuitously a substantial portion of its services;

Benefit a substantial and indefinite class of persons who are legitimate subjects of charity;

Relieve government of some of its burden; and

Operate entirely free from private profit motive.

Now, apply that test to the brand new YMCA down the road or the expensive senior-living center on the other side of the town or the local hospital that regularly rakes in a healthy profit.

Suppose, as former Mayor Ed Rendell has suggested, the city approach the big local non-profits to provide money to help the Philadelphia public schools via PILOTS – Payments in Lieu of Taxes? PILOTS are what they say they are – voluntary contributions made by institutions in lieu of being taxed.

As law professor Evelyn Brody has written: “PILOTS represent a compromise between the parties using what leverage they have available and negotiating in light of the hazards of litigation.”

With its Pike County ruling, the Supreme Court lessened the “hazards of litigation” for local governments, thereby increasing their leverage in getting concessions.

Brody is an expert on the dry, but important topic of tax-exempt status. She has written multi-page papers that say, in so many words, that the pressure is on big non-profits to contribute PILOTS or pay taxes as local governments get more and more pressed for money.

It’s especially relevant for Philadelphia which, according to the Lincoln Institute of Land Policy, has the highest percentage of tax-exempt property in the nation, measured in terms of dollars value. It is 11 percent here, compared to just over eight percent in Boston, which ranked No. 2.

The large non-profits are not defenseless babies when it comes to protecting their interests. They have friends in high places.

A bill has been duly introduced in the Pennsylvania Legislature and is currently sailing through the Senate and House that would, in effect, tell the Supreme Court to go jump into the lake and re-assert Act 55 as the controlling law.

The bill is backed – enthusiastically – by non-profits.

The change won’t happen overnight. For the legislature to trump the court, the state Constitution must be changed. To do that, the proposal must pass two consecutive sessions of the legislation and then be approved by the voters in a referendum.

The earliest that could happen would be 2015 or 2016.

Still, that’s enough time for local governments to extract PILOT agreements from their local non-profits if they have the political will to take on the big non-profit players in their communities.

The choice would be simple: would you prefer to pay voluntary PILOTS or would you rather be taxed at the full rate, just like poor Camp M in Pike County?

-0-0-

Philadelphia Colleges say they perform a public service by educating Philadelphia‘s high school graduates. AxisPhilly has done a reality check on those claims. You can read the results here.